Filed by: CFW Communications Company
Pursuant to Rule 425 under the Securities Act of 1933
Subject Company: CFW Communications Company
Comission File No. 0-16751
Contacts: CFW Communications Citigate Sard Verbinnen R&B Communications
Michael B. Moneymaker George Sard/Kim Polan J. Allen Layman
540-946-3531 212-687-8080 540-966-2200
CFW COMMUNICATIONS TO MERGE WITH R&B COMMUNICATIONS;
WILL ACQUIRE PRIMECO PCS OPERATIONS IN VIRGINIA
Combination Creates A Major Digital PCS Provider And
A Leading Integrated Communications Provider In The Mid-Atlantic;
New Company Will Operate Largest CDMA Network In Region With 8.3 Million POPs
CFW Receives Financing Commitments Totaling $925 Million
From Welsh, Carson, Anderson & Stowe And Morgan Stanley Dean Witter
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WAYNESBORO AND DALEVILLE, VA, May 18, 2000 -- CFW Communications Company
(NASDAQ: CFWC) and closely held R&B Communications, Inc., two Integrated
Communications Providers (ICPs) in the Mid-Atlantic region, today announced a
binding letter agreement to merge. CFW also announced a definitive agreement to
acquire PrimeCo's PCS licenses, assets and operations in Richmond and Norfolk,
Virginia.
Together, the two transactions will establish the combined company as a
major digital personal communications services (PCS) provider and a leading ICP
in the Mid-Atlantic region.
R&B is an ICP supplying local and long distance telephone service, and
dial-up and high-speed internet service to business and residential customers in
Roanoke, Virginia and the surrounding area as well as in the New River Valley of
Virginia. R&B also holds significant stakes in the Virginia and West Virginia
PCS Alliances, which are partnerships between CFW, R&B and third parties
providing digital PCS service to a potential customer base of 3.6 million people
in Virginia and West Virginia. As a result of the merger, the combined company
will have ownership interests in the PCS Alliances of 91% in Virginia and 78% in
West Virginia, enabling it to consolidate the Alliances' financial results. CFW
and R&B also own licenses covering another 1.8 million people, bringing the
total potential digital PCS customer base to 5.4 million.
CFW will exchange 60.27 shares of its common stock for each outstanding
share of R&B, or an aggregate of 3.7 million CFW shares, valuing this
transaction at approximately $131 million based on CFW's closing price yesterday
of $35.50 per share. The transaction will be a tax-free reorganization accounted
for as a purchase and is subject to the execution of a definitive agreement and
regulatory and shareholder approvals. Holders of a majority of R&B's shares have
agreed to vote in favor of the transaction.
The PrimeCo PCS operations, which are being divested in connection with
Bell Atlantic's pending merger with GTE, include PCS licenses and assets with
more than 86,000 current subscribers and a potential customer base of 2.9
million people in central and eastern Virginia, including Richmond, Norfolk and
the Tidewater region, and in the Outer Banks of North Carolina, a service area
contiguous to the combined company's current PCS service area.
CFW will purchase the PrimeCo PCS operations for a cash payment of $407
million to PrimeCo PCS, assumption of $20 million in lease obligations and
exchange of CFW's ownership interests and assets in two cellular properties. The
transaction is subject to closing of the Bell Atlantic/GTE merger and regulatory
approvals.
With this acquisition, the combined company, which will be renamed at a
later date, will have a digital PCS customer base of over 140,000, and will be
positioned to market its digital PCS services over the largest CDMA network in
its operating region, encompassing a potential customer base of 8.3 million
people.
"Together, these complementary strategic transactions will accelerate the
combined company's strategy of becoming a major digital PCS provider in the
Mid-Atlantic region," said James S. Quarforth, Chairman and Chief Executive
Officer of CFW. "The R&B merger also enhances the combined company's position as
a leading ICP in the region by significantly expanding our footprint in local
telephony. We will now have approximately 50,500 ILEC access lines, 13,300 CLEC
access lines and 56,300 internet customers, supported by a fiber-optic network
throughout the region."
CFW and R&B have partnered in the Virginia and West Virginia communications
markets for a number of years, resulting in several joint investments including
ValleyNet, a fiber optic consortium, the Virginia and West Virginia PCS
Alliances and several other digital PCS and LMDS wireless spectrum licenses. The
combined company will also own significant MMDS wireless spectrum licenses
throughout the region.
J. Allen Layman, President and Chief Executive Officer of R&B, commented,
"Our companies have worked together for a long time, and we believe this merger
represents the continuation of our growth strategies. The combination of CFW and
R&B's financial and human resources will offer many benefits to our customers,
employees and shareholders."
Mr. Quarforth will be Chief Executive Officer of the merged company and Mr.
Layman will become President and Chairman of the Board. Carl A. Rosberg,
President and Chief Operating Officer of CFW, will become Executive Vice
President and Chief Operating Officer and Michael B. Moneymaker, Chief Financial
Officer of CFW, will be Chief Financial Officer.
CFW Receives Financing Commitments Totaling $925 Million
Welsh, Carson, Anderson & Stowe (WCAS) will invest a total of $200 million
and affiliates of Morgan Stanley Dean Witter (MSDW) will invest $25 million in
preferred equity in the combined company. Upon receipt of regulatory approval,
WCAS will initially invest $100 million and MSDW will invest $12.5 million in
the form of convertible preferred stock with a conversion price of $41 per share
and an accretion rate of 8.5%. WCAS and MSDW will also receive 500,000 warrants
exercisable at a price of $50 per share. Proceeds from the investment will be
used to fund the continued buildout of CFW's communications network.
Upon closing of the acquisition of the PrimeCo PCS operations, WCAS and
MSDW will invest an additional $100 million and $12.5 million respectively in
the form of convertible preferred stock which, upon receipt of shareholder
approval, will have a conversion price of $45 per share and an accretion rate of
5.5%. Proceeds will be used to partially fund the acquisition.
WCAS and MSDW have also committed to provide $700 million in debt
financing. MSDW will provide $605 million in the form of $325 million in senior
bank debt and $280 million in senior bridge notes. WCAS will provide $95 million
in the form of subordinated debt. Proceeds will be used to complete funding of
the acquisition of the PrimeCo PCS operations, refinance certain debt of both
CFW and the Virginia and West Virginia PCS Alliances, and fund the continued
buildout of the combined company's communications network.
"We are very excited to have world-class firms like Welsh, Carson,
Anderson, & Stowe and Morgan Stanley Dean Witter as partners in our expanding
digital PCS and ICP franchise," said Mr. Quarforth. "Both of these blue-chip
partners have extensive communications experience, market credibility, and
significant capital resources that will greatly enhance our ability to execute
our long-term growth strategy."
"We are very enthusiastic about the opportunity to partner with CFW and R&B
in this series of company-transforming transactions which create a leading ICP
and digital PCS provider in the Mid-Atlantic region," said Anthony J. de Nicola,
a WCAS general partner.
Reflecting the R&B merger and WCAS' substantial equity investment, CFW's
seven-member Board of Directors will be expanded to include two current
directors from R&B and two directors from WCAS: Mr. Layman of R&B; John
Williamson III, President and CEO of RGC Resources; and Anthony J. de Nicola and
Lawrence B. Sorrel, general partners of WCAS.
The R&B merger and the PrimeCo PCS acquisition are both expected to close
in the third quarter of 2000.
Banc of America Securities LLC (BAS) acted as financial advisor to CFW in
connection with the R&B merger and the PrimeCo PCS acquisition. BAS advised CFW,
and MSDW advised WCAS, in connection with the private equity investment.
About CFW Communications
CFW Communications Company, doing business as CFW Intelos and Intelos, is an
Integrated Communications Provider with headquarters in Waynesboro, Virginia.
CFW provides a broad range of products and services to customers in Virginia,
West Virginia, Kentucky and Tennessee including digital PCS, dial-up Internet
access, high-speed data transmission, DSL (high-speed Internet access), and
local telephone service to businesses and long distance telephone services to
business and residential customers. Detailed information about CFW
Communications and Intelos is available at www.cfw.com and www.intelos.com.
About R&B Communications
R&B Communications, Inc. is an Integrated Communications Provider headquartered
in Daleville, Virginia. R&B provides a broad range of products and services to
customers in Roanoke and the surrounding communities and the New River Valley of
Virginia. These services include digital PCS, dial-up Internet access,
high-speed data transmission, DSL, and local telephone service to businesses and
long distance telephone services to business and residential customers. Detailed
information about R&B Communications is available at www.rbnet.com.
About Welsh, Carson, Anderson, & Stowe
Welsh, Carson, Anderson, & Stowe, a New York based private equity firm founded
in 1979, has organized 11 partnerships with total capital of $8 billion. WCAS
focuses on three industries: telecommunications, information services and
healthcare.
About Morgan Stanley Dean Witter
Morgan Stanley Dean Witter & Co. is a pre-eminent global financial services firm
that maintains leading market positions in each of its three business segments -
Securities, Asset Management and Credit Services. Morgan Stanley Dean Witter
combines global strength in investment banking and institutional sales and
trading with strength in providing full-service and online brokerage services,
investment and global asset management services and, primarily through its
Discover Card brand, quality consumer credit products. Morgan Stanley Dean
Witter provides its products and services to a large and diversified group of
clients and customers, including corporations, governments, financial
institutions and individuals.
Forward-looking statements made by the Companies are based on a number of
assumptions, estimates and projections. These statements are not guarantees of
future performance and involve risks and uncertainties and any significant
deviations from these assumptions could cause actual results to differ
materially from those in forward-looking statements. The Companies undertake no
obligation to revise or update such statements to reflect current events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
WE URGE INVESTORS AND SECURITY HOLDERS TO READ CFW'S REGISTRATION STATEMENT ON
FORM S-4 AND THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT
DOCUMENTS RELATING TO THE MERGER TRANSACTION DESCRIBED ABOVE, WHEN THEY BECOME
AVAILABLE, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. When these and other
documents relating to the transaction are filed with the Commission, investors
and security holders may obtain a free copy at the Commission's web site at
www.sec.gov. The documents filed with the Commission by CFW may also be obtained
for free from CFW by directing a request to CFW Communications Company, P. O.
Box 1990, Waynesboro, Virginia 22980, Attn: Investor Relations, telephone: (540)
946-3500. Certain of these documents may also be available on CFW's website at
www.cfw.com or www.intelos.com. WHEN THEY BECOME AVAILABLE, READ THE DEFINITIVE
REGISTRATION STATEMENT AND JOINT PROXY STATEMENT/PROSPECTUS CAREFULLY BEFORE
MAKING A DECISION CONCERNING THE MERGER.
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